Back in April, we discussed the implications of Lucent's
Ordinarily, you might expect the Feds to cut a company some slack when it rats itself out like this (although that hasn't been the case with other forthcoming companies such as Titan
Earlier this week, the Saudi situation took a turn for the worse. On Monday, Lucent announced that Richard McGinn, Lucent's CEO from 1996 to 2000, and two other ex-Lucent officers have received "Wells notices" from the SEC, advising that they may be civilly charged with bribery, failure to keep accurate accounting records, and failure to maintain adequate internal controls over company funds. Investors may be tempted to take heart from this announcement, as it was addressed to the officers themselves and not to the company. But that would be a mistake.
One of the key provisions of the FCPA is that it makes a company liable for the acts of its agents. Thus, if the ex-Lucent execs are found to have done something improper here, it will logically follow that the company was at fault as well. Moreover, the fact that the SEC is proceeding to the formal investigation stage strongly suggests that the SEC thinks its charges have merit, and will continue to pursue them.
As we pointed out back in April, "these investigations tend to drag on, and to drag down a targeted company's stock price while they last. Lucent shareholders may well be in for a long next few months." And indeed, since that article ran, Lucent's stock has dropped 15% in value, despite the company (1) turning in its first profitable year since 2000 and (2) being granted a windfall tax refund by the IRS in the meantime.
Fool contributor Rich Smith has no interest, short or long, in any of the companies mentioned in this article.